INSIDE Public Accounting Releases The 2016 National Benchmarking Report

Strong Revenue, Steady Profits, Changing Service Mix Underscore the State of the Nation’s Public Accounting Firms

The nation’s accounting firms are experiencing the strongest growth in revenues since the recession, averaging 6.3% last fiscal year, according to the just-released INSIDE Public Accounting’s (IPA) National Benchmarking Report.

In fact, 85% of the 540 firms that participated in IPA’s Annual Survey and Analysis of Firms experienced positive organic revenue growth. One in four firms experienced double-digit growth, and 4% of all participating firms grew organically at a rate of more than 20%.

Merger activity is still strong, particularly at the largest firms of $30 million and up. In this range, 45% reported at least one acquisition last year. Mergers have added an average of 3.1% to net revenue growth for the IPA 100 firms, the largest 100 firms in the country.

IPA’s National Benchmarking Report provides detailed information in 80+ pages of tables presented in nine different revenue bands and regional breakouts so firms can easily compare with other similar-sized firms.

This 27th annual report, the largest of its kind, is based on survey results from more than 540 accounting firms – a strong representation of the profession, including 225 firms under $10 million, 223 firms between $10 million and $50 million, and 69 firms above $50 million in net revenue.

“Firms are getting larger and adapting to changes in the business environment with new services,” says IPA Publisher Mike Platt. “The data shows partners are making more money too, growing at every level but especially at many smaller firms, where some leaders are quickly pivoting to emphasize wealth management or consulting services while taking full advantage of technology to increase efficiency and reduce office space costs.”

The data also reveals staffing challenges. Kelly Platt, IPA Publisher says, “The data shows that the IPA 100 firms specifically are losing a greater percentage of professional staff with 6-8 years of experience, and the percentage of staff with experience of two years or less is growing. It’s a job seekers’ market for professional staff with solid experience and deep expertise.”

The IPA National Benchmarking Report is used by managing partners, firm leaders, marketers, attorneys, firm administrators and business development directors to compare their firm’s performance against others, and to uncover trends, ideas and techniques to improve operations.

Some highlights:

Average net income per equity partner (NIPEP) in public accounting firms continues to rise, with gains over last year being made in nearly every revenue band.

Revenue per full time equivalent (FTE) is one of the strongest metrics available to show how well a firm is doing from year to year. Across all revenue bands, net revenue per FTE averages $179,297, up 2.8% over last year.

The $50 million-$75 million firms are showing the strongest increase in non-traditional services as a percentage of total revenue, with revenue divided nearly equally in three parts among tax, audit and “other” services.

Professional staff turnover rates in the largest firms (above $75 million) averaged 17.2% last year, with one in 5 experiencing turnover rates above 20%.

Average percentage of female ownership is at 17.5%, from 16.9% last year.

The report also covers partner compensation, administrative salaries, fees by niche, partner workloads, marketing costs, training requirements, realization, retirement plans and dozens of other metrics – both by revenue band and region of the country.